Recession - who decides?

A four-page paper from the Congressional Research Service (CRS) discusses the definition of a recession. The "generally recognized arbiter" of recessions is the National Bureau of Economic Research (NBER), specifically its business cycle dating committee. On Jan. 7, the committee issued a memo which stated in part:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

CRS notes that since it takes time to compile data, it can be more than a year to date the beginning of a recession. The paper concludes:

Although there can be a significant delay between the onset of a recession and the dating committee determination, there is often little doubt that the economy is, or has been, in recession well before the announcement. For policy to have mitigating effects, it must occur quickly. Policymakers may not have the luxury of holding themselves to as strict a definition of recession as economic analysts.

What is a Recession, Who Decides When It Starts, and When Do They Decide? RS22793 (pdf, 4pp/64kB, from Open CRS), Jan. 23, 2008